Mortgage Securities Are Sold As Safe But They Often Are Not

Mortgage securities, or CMOs are debt securities issued by a special purpose entity, and are not a debt owed by the institution creating and operating the entity. The entity is the legal owner of a set of mortgages, called a pool. Investors in a CMO buy bonds issued by the entity, and they receive payments from the income generated by the mortgages according to a defined set of rules.

CMOs are most often backed by mortgage loans, which are originated by thrifts (savings and loans), mortgage companies, and the consumer lending units of large commercial banks. Loans meeting certain size and credit criteria can be insured against losses resulting from borrower delinquencies and defaults by any of the Government Sponsored Enterprises (GSEs) (Freddie Mac, Fannie Mae, or Ginnie Mae). In CMOs backed by loans of lower credit quality, such as subprime mortgage loans, the issuer will sell a quantity of bonds whose principal value is less than the value of the underlying pool of mortgages. Because of the excess collateral, investors in the CMO will not experience losses until defaults on the underlying loans reach a certain level. If the overcollateralization turns into under collateralization, then the CMO defaults.

CMO’s are risky and illiquid. They are not suitable for conservative or moderate investors. If your investment advisor sold you CMOs and they were not suitable for your needs and objectives or you were not disclosed risks, or were promised facts that were not truthful, you may have a claim.

Heiner Law Offices has Knowledge and Experience about CMOs

Your broker might have had a conflict of interest or failed to perform a suitability analysis prior to recommending you a CMO. Our firm has the knowledge and skill to advise you on your options going forward. We will discuss the facts with you that led you to being sold a CMO, and if we determine that misconduct took place during the recommendation and sale and you lost money, when you retain our law firm to represent you, we will aggressively pursue your claims.

We will work hard to hold the wrongful party responsible for your losses and we will seek the full restitution and recovery you deserve.

Contact Us for a Free Consultation

Contact our office today to discuss your case. We offer a free initial consultation. You can reach us by phone at 801-366-5200 or via email. We try to take every case on a contingency basis which means we don’t collect a legal fee unless we successfully make a financial recovery for you.